How to start a VC fund
KfW Capital commenced operations on October 15, 2018. The aim of the new subsidiary of KfW, based in Frankfurt am Main, is to strengthen the VC and VD fund landscape in Germany and Europe in order to gain access to capital for young, innovative, fast-growing technology companies in Germany in the start-up and growth phase improve. With the support of the ERP special fund (ERP-SV), KfW's previous investment volume in VC and VD funds will initially be increased to an average of EUR 200 million p.a. by 2020. The new investment company builds on the professional preparatory work of KfW and the Federal Ministry of Economics (BMWi). Since 2015 - the start of the "ERP Venture Capital - Fund Investment" program - KfW has invested EUR 265 million in 18 venture capital funds and, together with the BMWi, in 2016 Coparion, the large co-investment fund, founded. In addition to these fund investments, KfW Capital will also take over KfW's existing investments in the three generations of the high-tech start-up fund.
As part of the “ERP VC Fund Financing” program, KfW Capital participates in German and European VC and VD funds with a maximum of 19.99% and a maximum of EUR 25 million. This is a prerequisite for KfW Capital's investment decision to invest at least the amount it has brought in in German technology companies. KfW Capital will invest across all sectors - in follow-up funds from experienced fund management companies, but also in so-called first-time funds, in order to stimulate the market as a whole. KfW is transferring its previous ERP-VC fund investments to KfW Capital, as well as the stakes in the high-tech start-up funds I, II and III and in the Coparion co-investment fund.
The foundation of the subsidiary and expansion of the investment business is based on the idea of substantially further developing the market for venture capital financing as a growth driver for the German economy. The starting point was a resolution of the German Bundestag in March last year, which KfW, the BMWi and the BMF gave a corresponding order. As a result, KfW's Board of Directors passed a resolution in June of last year to set up a subsidiary. There is currently a supply gap of EUR 500 million to EUR 600 million p.a. in Germany in the growth finance segment.
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